Page 5 - EurOil Week 40 2022

EurOil COMMENTARY EurOil

However, despite widespread pressure, the Action points
group’s top producers – Saudi Arabia and Rus- The output reduction – and consumers’ dis-
sia – have stuck by each other, appearing to have pleasure – only serves to highlight the presci-
learnt from the folly of their short-lived price ence of Saudi Aramco CEO Amin Nasser’s re-
war that coincided with the start of the pan- cent repetition of criticism that the challenges
demic, and members said that the reductions in supplying the market are largely borne of
were required “in light of the uncertainty that long-term upstream underinvestment.
surrounds the global economic and oil market Nasser has long been critical of the lack of
outlooks.” balance with which developed nations have
With sanctions constraining the market approached the energy transition while doing
for Russian crude as its ‘military operation’ little to reduce reliance on imports, all while crit-
in Ukraine continues and Moscow moves icising the regimes of exporting nations. Amid
to annexe four south-eastern regions of its the shortfall on physical markets as sanctions
neighbour, Riyadh has refrained from crit- and supply chain issues persist, the tail is firmly
icism, perhaps with an eye on the stabil- wagging the dog.
ity of oil relations and another on its own In their joint statement, Sullivan and Deese
long-running military campaign in Yemen. reiterated the US Department of Energy’s intent
Russia was reported to be keen to cut to “deliver another 10mn barrels from the Stra-
output by 1mn bpd, while Saudi Arabia had tegic Petroleum Reserve to the market next
been rumoured to be considering an addi- month, continuing the historic releases the
tional, unilateral cut in the region of 500,000 President ordered in March.” This has delivered
bpd. around 850,000 bpd since June.
The two countries account for more half They added: “The President will continue
of the OPEC+ group’s 43.86mn bpd produc- to direct SPR releases as appropriate to protect
tion quota for October at 11mn bpd each, American consumers and promote energy secu-
but while Saudi Arabia has been able to pro- rity, and he is directing the Secretary of Energy
duce around this level of late, Russian output to explore any additional responsible actions to
has fallen as sanctions bite. continue increasing domestic production in the
With both countries’ quotas now falling to immediate term.”
10.478mn bpd, there will be less pressure on However, the SPR has reached its lowest level
Saudi Arabia to maintain production at lev- since the mid-1980s and will continue to fall
els nearing all-time highs as prices sit in what until the end of the year, and may drop below
Riyadh likely sees as a ‘middle ground’. Other 400mn barrels with more than half of this already
producers that have been ‘maxing out’, most accounted for under Congress-mandated sales.
notably Kuwait, will also welcome the respite This significantly limits the options available to
given issues in raising output. the US in terms of further SPR releases.
It was perhaps with this in mind that the
Cuts White House statement added: “In light of
While OPEC+ will reduce their collective quo- today’s action, the Biden Administration will
ta by the headline 2mn bpd, underproduction also consult with Congress on additional tools
among members will see output fall by around and authorities to reduce OPEC’s control over
1-1.1mn bpd, according to Saudi Arabian En- energy prices,” perhaps alluding to efforts to
ergy Minister Prince Abdulaziz bin Salman Al- push forward the NOPEC bill which is aimed at
Saud. targeting the group’s ability to steer the market.
The group fell around 3.6mn bpd short of Such a move would need to pass through
its 43.856mn bpd quota with Iranian, Russian Congress and should it be implemented, it would
and Venezuelan sales remaining constrained by surely be the final nail in the coffin in relations
sanctions and Angola and Nigeria dealing with between Biden and Washington’s key Middle
production issues. Eastern allies Saudi Arabia and the UAE. ™

Week 40 06•October•2022 www. NEWSBASE .com P5